Challengers Handicapped in Battle of U.K. Banks

When U.K. challenger banks step into the ring to face heavyweight incumbents, they are handicapped by comically oversize and heavy boxing gloves—and they must pay for the privilege. So says the chief of one of those challengers, Secure Trust.

And yet, investors are backing these upstarts. Secure Trust just raised £50 million ($84.9 million) in new capital at a price-to-book multiple of more than six times and at just a 3.8% discount to its preissue closing price. TSB Banking Group, which was spun out of Lloyds Banking...